Deciding whether bankruptcy is best for your situation is complex enough. If you have decided you need bankruptcy relief, the next question to consider is whether to file now or file later. Although filing provides immediate protection against collection efforts, there are situations in which you will be better off if you wait. One major issue is how your situation might play out under current laws, but another issue is how the law may soon change to help you out of your debt problems without bankruptcy (or otherwise make bankruptcy less useful).

Your situation under current laws

The conditions that made your debt unmanageable could persist after bankruptcy, but after your bankruptcy case you will be barred from filing again for a number of years. For instance, your debts cannot be discharged with a Chapter 7 case if you received the same discharge within the previous eight years. So if you have ongoing medical expenses, for example, you might get your current debt discharged by filing now, but you cannot get relief from your new expenses for a long time. If you are pregnant or expecting significant medical treatment soon, filing immediately may be a mistake.

What happens if you expect to receive an inheritance soon? If you inherit property within 180 days after your bankruptcy filing, it automatically becomes property of the bankruptcy estate, meaning it can be sold off to pay creditors. This is the case even though it might take years for your inheritance to be distributed from your deceased relative’s estate. If you inherit while paying into a plan for a Chapter 13 bankruptcy, you may have to adjust your plan and make higher payments. If the inheritance is large enough, it could have helped you avoid bankruptcy in the first place.

New options may come from new laws

Congress continues to react to the economic crisis that deepened in 2008, and we are in the midst of a transition between presidential administrations. There are new laws affecting consumer debt, and we will see more this year. The HOPE for Homeowners Act came into effect last year to give homeowners facing foreclosure a chance at refinancing their mortgage loans, but it requires their current lenders to be willing to accept 90% of the appraised value of the house. It is not clear yet how many homeowners may have this option.

Currently, both houses of Congress are considering legislation that would allow homeowners to have terms of their mortgage modified in bankruptcy, something that cannot be done under the current law. This bill is called the Helping Families Save Their Homes in Bankruptcy Act of 2009, but Citigroup has been involved in the negotiations, so we do not know where this proposal will end up. There could be an advantage in waiting to file for bankruptcy until after such a law is in effect, though it could come with costs that do not apply now.

Making your decision

These are just some reasons why you should carefully review your situation and explore your options with a bankruptcy lawyer. You should also seek help from financial or housing counselors, consider debt management options, and determine whether your creditors are willing to negotiate or settle. However, be careful of offers from services that sound too good to be true because they can get you even deeper in debt.

On the web:

• Nolo’s Bankruptcy & Foreclosure Blog
• Bankruptcy Law Network